People turn back to cars during pandemic

If nothing else, COVID-19 may have us falling in love all over again with our vehicles.

For years, automotive experts have been predicting a shift away from private vehicle ownership, saying shared autonomous vehicles were where the industry was headed. Especially in metropolitan areas where public transportation was more abundant, the concept seemed likely, and the rise of ride sharing companies such as Uber and Lyft seemed to underscore that prediction.

Then COVID-19 swept across the country and uprooted normalcy. When that happened, Americans turned to their safe spaces.

"The vehicle, in many ways, has become our own private bubble," Jonathan Smoke, chief economist for Cox Automotive, said during an Aug. 5 webinar that was part of the Center for Automotive Research's annual Management Briefing Seminars.

Vehicles became the place where Americans could share experiences instead of rides. High school graduations were done in drive-thru fashion with graduates handed their diplomas through the passenger-side windows. Car parades with honking horns and homemade signs replaced the traditional ice-cream-and-cake birthday party. Churches held Easter services at drive-in movie theaters.

"There are all kinds of things," Smoke said, "that are actually more vehicle-dependent in ways many of us could have never imagined."

While it is unlikely that America's infatuation for these vehicle comforts will last forever, it has changed the outlook for the auto industry, at least in the short term.

Jeff Schuster, LMC Automotive's president of Americas operations and global vehicle forecasts, expects the lingering effects of the virus to impact shared vehicles more than anything else. If nothing else, he said, it will delay by about three years the development, launch and adoption of autonomous driving models—especially those that are level 4 or 5 autonomous sharing.

"It is really going to depend on what happens with this virus, the vaccine and how people behave in a post-vaccine environment," Schuster said.

In the near term, shared mobility likely will continue, just in ways that weren't anticipated.

Pointing to the recent successes of delivery services such as Grubhub, Door Dash and Uber Eats, Mike Wall, IHS Markit's executive director of automotive analysis, noted that Americans are embracing and using shared vehicles; we're just not moving people.

"We are moving goods, we're moving foods," Wall said. "It is amazing to see how we evolve. So, I wouldn't write off the concept of that type mobility, but I do think it is going to evolve. And I think we are seeing it evolve."

Reviving auto sales
The American automotive industry is reeling from the coronavirus pandemic. As the industry and its consumers try to get their bearings, they're forced to navigate additional political and social circumstances.

"We had been seeing improving customer sentiment until we got to Memorial Day weekend," Smoke said.

That was when COVID-19 cases began rising again in the U.S., and it marked the start of countrywide protests following the death of George Floyd.

Unfortunately, Smoke said, the road ahead doesn't seem any less challenging.

"Americans are really challenged by the situation with schools (reopening) and that is influencing attitudes about the fall," Smoke said. "Plus, we are 13 weeks away from the most polarized presidential election that most of us have experienced in our lifetimes."

All of that will weigh heavily on the already slumping market. According to the forecasts presented by Smoke, Schuster and Wall, light vehicles sales this year should fall somewhere between 13 and 14 million, well below the 17 million mark the industry hit last year. And it could be 2025 before sales hit that mark again, according to Schuster.

That slowing of auto sales—and, for that matter, production—also means that many auto makers are delaying or even canceling the launch of new vehicles.

Coming into 2020, IHS Markit anticipated 350 new vehicle launches. By August, auto makers had hit the brakes on dozens of those, Wall said, noting that he now expects about 295.

"This is something that transcends any one region, any one market," Wall said of the global pandemic and its far-reaching impacts. "This is something we will be wrestling with as an entire industry."

In evaluating the data of auto sales, Smoke noticed something else about the pandemic and its refusal to leave any part of the auto industry untouched.

When the coronavirus first took hold, pickup sales remained fairly strong, a bright spot in an otherwise dismal few weeks for the industry in March and April. Smoke attributes this to the virus hot spots.

"Because vehicles are not consistent in the way they are sold around the country, we could really see some differences," Smoke said.

Initially, COVID-19 flared up in regions that aren't reliable on pickup sales, but perform strongly for other vehicle types. That's changed. Today, the Midwest and South—regions where pickup sales are strong—are battling coronavirus outbreaks of their own. So pickup sales are slipping some, while sales of other vehicles are picking up in regions that have seen COVID-19 recovery.

"If you drilled into the data, what you would see was that we had markets at various stages of recovery," Smoke said. "And so, at first, we only had a handful of markets recovering. Then, by June, that was really when we hit the best performance we have had all year from a market perspective."

June and July were particularly strong, Smoke said, because Americans were able to better gauge their financial situations. He also thinks the two-month period indicated a delay in new vehicle purchases. In a typical year, April and May are strong months for auto sales, but in 2020, many dealers closed their doors.

"July did end up delivering improvement in both new and used (vehicles)—as we estimate them—over the month of June," Smoke said. "But I really think what we achieved in July will be difficult to maintain."

The government response to the pandemic also played a key role in reviving sales of vehicles. Further, it will be integral for sustaining new and used car sales moving forward. Smoke pointed to the initial stimulus package as proof. The used vehicle market, he said, began recovering almost exactly the same week that stimulus checks hit bank accounts.

That makes a second round of stimulus important for an industry rebound, the experts said, but it also depends on how its handled. For instance, a Cash for Clunkers type of stimulus might not be as beneficial for the industry this time around.

"The risk," Schuster said, "is that the dealer inventory isn't there to support it right now."